Copper miner Teck Resources rejects Glencore’s $22.5 billion offer

By Clara Denina and Pratima Desai

LONDON (Reuters) -Copper and zinc miner Teck Resources (NYSE:) rejected an unsolicited $22.5 billion bid from Glencore (OTC:) Plc on Monday, citing a reluctance to expose its shareholders to thermal coal, oil, LNG and related sectors.

New York-listed shares of Teck jumped more than 16% after the news, while London-listed shares of Glencore closed Monday down 2.6%.

Glencore’s all-share offer represents a 20% premium to Teck’s closing stock price on March 26, when the bid was made privately. The proposal includes a plan to simultaneously spin off the companies’ thermal and steelmaking coal businesses and rebrand the remaining company as “GlenTeck.”

Glencore Chief Executive Gary Nagle told investors there was no possibility of a sweetened bid. “This is not a takeover, but a merger,” he said.

Teck said it worries any combination of the two companies would expose its shareholders to Glencore’s large thermal coal business, an unwanted oil trading business and significant jurisdictional risk, all of which would negatively impact its value.

“The board is not contemplating a sale of the company at this time,” Teck Chair Sheila Murray said in a letter to Glencore’s board.

Teck said more value could be created through a proposed restructuring announced earlier this year which would see the Vancouver-based miner spin off its steelmaking coal unit to focus on and other industrial metals. A vote on this proposal is scheduled for April 26. 

After the separation, Teck’s metal-focused unit plans to be known as Teck Metals Corp, while the new divested unit will be listed in Toronto as Elk Valley Resources Ltd.

Addenda Capital, which holds about 1% of Teck’s shares, said it supports Teck’s existing plans. “The (Glencore) bid is too low for us to have any interest,” Addenda’s Todd Kapala told Reuters.

Analysts at Scotiabank said they believe the chances of any deal with Glencore to be “extremely low.”

“We view the Glencore offer as an opportunistic bid designed to take advantage of the current dislocation in Teck shares related to the proposed near-term business separation,” they said.

Canada’s Keevil family controls Teck through its dominant ownership of ‘A’ class of shares, which have more voting power than the numerous ‘B’ class shares held by institutions, could make any further merger discussion hard.

Norman Keevil, chairman emeritus of Teck Resources, said in a statement that he “unequivocally” supports Teck’s rejection of Glencore’s offer.

“Now is not the time to explore a transaction of this nature, and I have the utmost confidence in the board’s and our management teams’ strategy to maximize value for … shareholders after the separation,” Keevil said.

This is not the first time Glencore and Teck have talked about the possibility of a spinoff and merger of their coal businesses. Informal discussions took place in 2020 before breaking down without agreement.

Glencore’s Nagle said that were this new proposed deal to go through, the new GlenTeck would be listed in London and have the potential to produce around 3 million tonnes of copper annually, making it one of the world’s largest miner of the red metal.

Assets producing copper, used in rechargeable batteries and charging stations for electric vehicles, are major targets for mining companies hunting for minerals needed for the energy transition.

The merged coal company would be primarily listed in New York, Nagle said, based on the feedback received from investors and appetite for such a company there.

Nagle added that he did not envisage major antitrust issues.

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